REASONS BEHIND FAILURE OF SECI’S MANUFACTURING LINKED SOLAR TENDERSadmin
The Solar Energy Corporation of India Ltd (SECI) has taken multiple initiatives to support and uphold Indian solar power industry and its priorities. However, its recent actions, mainly the 10 GW capacity solar project tender that came with a mandate to set up a 5 GW of manufacturing facility to win the privilege of bidding has faced failure in attacking bidders.
The tender was announced in May 2018 and has gone through bid submission deadline extension for no less than 6 times till now in hopes of getting a better response. This was the largest solar tender of its kind in the world. And although, SECI presented this tender as a support to domestic solar manufacturing, and expressed hope that it will enhance manufacturing capacity within the country, the tender received only 1 bid till date. The bid was submitted by NYSE-listed Azure Power on 19th November 2018 to set up 600 MW of manufacturing as well as 2,000 MW of power project.
It is also important to note that the solo bid by Azure Power came after the authorities reduced the capacity of manufacturing unit setup mandate from 5 GW to 3 GW In Sept 2018. Even the very recent (Jan 2019) initiative by SECI to attract developers by floating smaller capacity manufacturing linked projects (3 GW project linked with 1.5 GW manufacturing capacity) sits in the darkness.
The question we need to pursue is ‘why SECI’s manufacturing linked solar tenders are not receiving warm response?’, and frankly, the answer lies within the industry scenario.
The primary reason behind failure of manufacturing linked solar tenders is- trying to force developers to take on a business venture, which is not their core speciality. Manufacturing requires high equity and low lending, while on the other hand project generation focuses on low equity and high lending, therefore asking a single entity to handle them together successfully is asking a lot.
Besides, denying incentives to set up plant (under Central Government Program), mandating to set up transmission network up to the interconnection or delivery point and leaving developers to handle the high interest and capital cost of the project (and setting up manufacturing unit) are coming in the way of success for SECI’s manufacturing linked tenders.
Additionally, lack of funding push from the Centre can also be considered another reason for developers not stepping up for the projects. These are the reasons why developers are hesitant to shoulder such projects, even after SECI rising its ceiling tariff for the tender from Rs 2.95 per unit to Rs 2.74 per unit.
In the same breath, we need to highlight that although, these tenders were suggested to be a support for domestic solar manufacturing industries, it did nothing to create demand for existing manufacturers, leading to un-utilization of their capacities.
2018 had been a very trying year for solar, witnessing record project cancellations (out of ~35 GW tendered solar projects in 2018, only 13 GW of projects were auctioned) due to entities like GUVNL, UPNEDA, SECI trying to drive down the solar tariff even lower.
India already has a module manufacturing capacity that is capable enough to support domestic projects and given the chance can help India claim a major portion of the global solar export market (currently India exported only $80mn worth of solar equipment in FY 18-19). However, for that to happen, Indian solar industry has to prioritize domestic manufacturing industry, creating and implementing favourable policies, subsidies to create demand and protect the sector.
Supporting the promising and existing industry is much more profitable than trying to create a new industry (solar project development + manufacturing) that has its own set of rules. Government of India has made incredible and decisive decisions to support solar in India throughout the years. However, policy instruments are needed to be realigned towards manufacturing in order to facilitate real growth in the manufacturing sector.